There’s Twice as Many Bulls Than Bears Out There

In the latest Investors Intelligence report, the bullish percentage surged to 54.8 percent while the bearish percentage dipped to 25.8 percent.

This is the first time since last August that the bulls have outnumbered the bears by more than 2 to 1.

There is a big difference between the two readings though. In August 2011, the bullish percentage was still in a downward trend from the huge discrepancy reached in April. The current reading comes as the bullish percentage is climbing.

While this ratio isn’t an alarming one, it is something investors will want to keep an eye on. Historically when the ratio of bulls to bears reaches 3 to 1, it isn't a good sign for the market.

The last few times the ratio exceeded 3 to 1 were in April 2011, April 2010, January 2010 and November 2007. All of these instances were met with a small pullback at the very least and in the case of November 2007, it was the start of a bear market.

The current ratio of 2.12 has a long way to go before it hits the historical extreme level of three to one, but the percentages can change rapidly.